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Press Release

Farmers National Banc Corp. Announces 2019 First Quarter Financial Results

Company Release - 4/24/2019 8:00 AM ET
  • Net income is 9% higher than same quarter in 2018
  • 145 consecutive quarters of profitability
  • Annualized return on average assets was 1.45% and annualized return on average equity 12.71% for the quarter ended March 31, 2019
  • 9% loan growth since March 31, 2018
  • Non-performing assets to total assets remain at low levels, 0.33% at March 31, 2019

CANFIELD, Ohio--(BUSINESS WIRE)-- Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three months ended March 31, 2019.

Net income for the three months ended March 31, 2019 was $8.4 million, or $0.30 per diluted share, which compares to $7.7 million, or $0.28 per diluted share, for the three months ended March 31, 2018 and $8.7 million or $0.31 per diluted share for the linked quarter. Annualized return on average assets and return on average equity were 1.45% and 12.71%, respectively, for the three month period ending March 31, 2019, compared to 1.45% and 13.03% for the same three month period in 2018, and 1.50% and 13.65% for the linked quarter. Farmers’ return on average tangible equity (Non-GAAP) was 14.99% for the quarter ended March 31, 2019 compared to 15.84% for the same quarter in 2018 and 16.68% for the linked quarter.

Kevin J. Helmick, President and CEO, stated, “As a result of 9% loan growth, 8.5% increase in noninterest income, careful management of our noninterest expenses and continued strong asset quality, we are pleased to report a 9% increase in net income compared to the same quarter one year ago. We are also pleased to report a 29% increase in cash dividends paid to our shareholders, from $0.07 per share paid in the first quarter of 2018 to $0.09 paid for the same quarter in 2019.”

2019 First Quarter Financial Highlights

  • Loan growth

Total loans were $1.74 billion at March 31, 2019, compared to $1.60 billion at March 31, 2018, representing an increase of 9%. The increase in loans is a direct result of Farmers’ focus on loan growth utilizing a talented lending and credit team, while adhering to a sound underwriting discipline. The increase in loans has occurred in the commercial, commercial real estate, residential real estate and agricultural loan portfolios. Loans now comprise 79.3% of the Bank's average earning assets for the quarter ended March 31, 2019, an improvement compared to 78.1% for the same period in 2018. This improvement, along with the growth in earning assets, has resulted in a 16.5% increase in tax equated loan income in the first quarter of 2019 compared to the same quarter in 2018.

  • Loan quality

Non-performing assets to total assets remain at a low level, currently at 0.33%. Early stage delinquencies also continue to remain at low levels, at $9.1 million, or 0.52% of total loans, at March 31, 2019. Net charge-offs for the current quarter were $365 thousand, compared to $540 thousand in the same quarter in 2018 and total net charge-offs as a percentage of average net loans outstanding is only 0.08% for the quarter ended March 31, 2019.

  • Net interest margin

The net interest margin for the three months ended March 31, 2019 was 3.81%, an 11 basis points decrease from the quarter ended March 31, 2018, but a 1 basis point increase from the linked quarter. In comparing the first quarter of 2019 to the same period in 2018, asset yields increased 29 basis points, while the cost of interest-bearing liabilities increased 54 basis points. Most of this increase was the result of higher rates paid on interest-bearing checking accounts and time deposits, consistent with increases in the federal funds sold rate. The net interest margin is impacted by the additional accretion as a result of the discounted loan portfolios acquired in the previous mergers, which increased the net interest margin by 4 basis points for both quarters ended March 31, 2019 and 2018.

  • Noninterest income

Noninterest income increased 8.49% to $6.5 million for the quarter ended March 31, 2019 compared to $6.0 million in the same quarter in 2018. Gains on the sales of mortgage loans increased $184 thousand or 38%, other operating income increased $169 thousand or 51% and insurance agency commissions also increased $104 thousand or 15% in comparing the first quarter of 2019 to the same quarter in 2018. These increases were offset by a drop in debit card interchange income of $28 thousand or 3.5% and retirement plan consulting fees of $21 thousand or 5.5%.

  • Noninterest expenses

Farmers has remained committed to managing the level of noninterest expenses. Total noninterest expenses for the first quarter of 2019 increased 5.8% to $16.0 million compared to $15.1 million in the same quarter in 2018, primarily as a result of an increase in salaries and employee benefits of $618 thousand and other operating expense of $280 thousand, offset by a $135 thousand decrease in FDIC insurance expense. It is important to note that annualized noninterest expenses measured as a percentage of quarterly average assets decreased from 2.83% in the first quarter of 2018 to 2.77% in the first quarter of 2019.

  • Efficiency ratio

The efficiency ratio for the quarter ended March 31, 2019 improved slightly to 57.83% compared to 57.98% for the same quarter in 2018. The main factors leading to this improvement were the increase in net interest income and noninterest income and the stabilized level of noninterest expenses relative to average assets as explained in the preceding paragraphs.

2019 Outlook

Mr. Helmick added, “Coming off an historic 2018, this is an encouraging start to 2019. We are extremely proud of our committed employees that continue to deliver strong results for our stakeholders and remain committed to our community banking approach and culture.”

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $2.4 billion in banking assets. Farmers National Banc Corp.’s wholly-owned subsidiaries are comprised of The Farmers National Bank of Canfield, a full-service national bank engaged in commercial and retail banking with 41 banking locations in Mahoning, Trumbull, Columbiana, Stark, Wayne, Medina and Cuyahoga Counties in Ohio and Beaver County in Pennsylvania, Farmers Trust Company, which operates four trust offices and offers services in the same geographic markets, and National Associates, Inc. Total wealth management assets under care at March 31, 2019 are $2.5 billion. Farmers National Insurance, LLC and Bowers Insurance Agency, Inc., wholly-owned subsidiaries of The Farmers National Bank of Canfield, offer a variety of insurance products.

Non-GAAP Disclosure

This press release includes disclosures of Farmers’ tangible common equity ratio, return on average tangible assets, return on average tangible equity and net income excluding costs related to acquisition activities, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers’ marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures are included in the tables following Consolidated Financial Highlights below.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Farmers’ financial condition, results of operations, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management’s current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Farmers’ control. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions, as well as any statements related to future expectations of performance or conditional verbs, such as “will,” “would,” “should,” “could” or “may.” Farmers’ actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Farmers’ actual results to differ materially from those described in the forward-looking statements can be found in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2018, which has been filed with the Securities and Exchange Commission (SEC) and is available on Farmers’ website (www.farmersbankgroup.com) and on the SEC’s website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management’s views as of any subsequent date. Farmers does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

 
Farmers National Banc Corp. and Subsidiaries
Consolidated Financial Highlights
(Amounts in thousands, except per share results) Unaudited
         
Consolidated Statements of Income For the Three Months Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
2019   2018   2018   2018   2018
Total interest income $ 24,679 $ 24,447 $ 23,563 $ 22,474 $ 21,282
Total interest expense   4,714       4,373       3,644       2,912       2,336  
Net interest income 19,965 20,074 19,919 19,562 18,946
Provision for loan losses 550 525 950 750 775
Noninterest income 6,520 6,705 6,478 6,306 6,010
Acquisition related costs 0 (180 ) 0 0 25
Other expense   15,977       16,163       16,180       15,458       15,071  
Income before income taxes 9,958 10,271 9,267 9,660 9,085
Income taxes   1,570       1,585       1,183       1,587       1,359  
Net income $ 8,388     $ 8,686     $ 8,084     $ 8,073     $ 7,726  
 
Average diluted shares outstanding 27,983 27,781 27,695 27,641 27,918
Basic and diluted earnings per share 0.30 0.31 0.29 0.29 0.28
Cash dividends 2,500 2,223 2,222 1,935 1,935
Cash dividends per share 0.09 0.08 0.08 0.07 0.07
Performance Ratios
Net Interest Margin (Annualized) 3.81 % 3.80 % 3.86 % 3.93 % 3.92 %
Efficiency Ratio (Tax equivalent basis) 57.83 % 57.73 % 58.70 % 57.31 % 57.98 %
Return on Average Assets (Annualized) 1.45 % 1.50 % 1.42 % 1.47 % 1.45 %
Return on Average Equity (Annualized) 12.71 % 13.65 % 12.80 % 13.28 % 13.03 %
Dividends to Net Income 29.80 % 25.59 % 27.49 % 23.97 % 25.05 %
Other Performance Ratios (Non-GAAP)
Return on Average Tangible Assets 1.46 % 1.54 % 1.46 % 1.50 % 1.46 %
Return on Average Tangible Equity 14.99 % 16.68 % 15.70 % 16.24 % 15.84 %
Return on Average Tangible Equity excluding acquisition costs and deferred tax asset adjustments 14.99 % 16.34 % 15.70 % 16.24 % 15.88 %
 
Consolidated Statements of Financial Condition
March 31, Dec. 31, Sept. 30, June 30, March 31,
2019   2018   2018   2018   2018
Assets
Cash and cash equivalents $ 69,672 $ 57,926 $ 75,635 $ 76,623 $ 52,149
Securities available for sale 403,770 402,190 389,996 388,890 384,396
Equity securities 7,460 7,130 6,892 6,344 6,009
Loans held for sale 2,360 1,237 1,428 1,987 399
Loans 1,743,651 1,735,840 1,691,532 1,639,191 1,599,339
Less allowance for loan losses   13,777       13,592       13,377       12,764       12,550  
Net Loans   1,729,874       1,722,248       1,678,155       1,626,427       1,586,789  
 
Other assets   142,938     137,999     140,572     137,668     137,775  
Total Assets $ 2,356,074     $ 2,328,730     $ 2,292,678     $ 2,237,939     $ 2,167,517  
 
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing $ 415,131 $ 421,950 $ 426,689 $ 420,991 $ 402,499
Interest-bearing   1,539,202       1,377,770       1,332,022       1,229,346       1,234,660  
Total deposits 1,954,333 1,799,720 1,758,711 1,650,337 1,637,159
Other interest-bearing liabilities 109,348 250,792 270,273 322,565 274,816
Other liabilities   19,442       15,898       14,905       17,527       14,302  
Total liabilities 2,083,123 2,066,410 2,043,889 1,990,429 1,926,277
Stockholders' Equity   272,951       262,320       248,789       247,510       241,240  

Total Liabilities and Stockholders' Equity

$ 2,356,074     $ 2,328,730     $ 2,292,678     $ 2,237,939     $ 2,167,517  
 
Period-end shares outstanding 27,777 27,792 27,777 27,641 27,641
Book value per share $ 9.83 $ 9.44 $ 8.96 $ 8.95 $ 8.73
Tangible book value per share (Non-GAAP)* 8.26 7.86 7.36 7.34 7.10
 

* Tangible book value per share is calculated by dividing tangible common equity by period-end shares outstanding

 
Capital and Liquidity
Common Equity Tier 1 Capital Ratio (a) 12.39 % 12.16 % 12.13 % 12.11 % 12.06 %
Total Risk Based Capital Ratio (a) 13.13 % 13.03 % 13.00 % 12.97 % 12.94 %
Tier 1 Risk Based Capital Ratio (a) 12.49 % 12.28 % 12.26 % 12.24 % 12.19 %
Tier 1 Leverage Ratio (a) 9.92 % 9.91 % 9.87 % 9.81 % 9.68 %
Equity to Asset Ratio 11.58 % 11.26 % 10.85 % 11.06 % 11.13 %
Tangible Common Equity Ratio (b) 9.92 % 9.56 % 9.09 % 9.25 % 9.24 %
Net Loans to Assets 73.42 % 73.96 % 73.20 % 72.68 % 73.21 %
Loans to Deposits 89.22 % 96.45 % 96.18 % 99.32 % 97.69 %
Asset Quality
Non-performing loans $ 7,578 $ 7,731 $ 9,222 $ 8,406 $ 7,893
Other Real Estate Owned 208 0 0 0 59
Non-performing assets 7,786 7,731 9,222 8,406 7,952
Loans 30 - 89 days delinquent 9,082 8,877 10,626 10,636 6,973
Charged-off loans 566 753 544 777 782
Recoveries 201 443 207 241 242
Net Charge-offs 365 310 337 536 540
Annualized Net Charge-offs to
Average Net Loans Outstanding 0.08 % 0.07 % 0.08 % 0.13 % 0.14 %
Allowance for Loan Losses to Total Loans 0.79 % 0.78 % 0.79 % 0.78 % 0.78 %
Non-performing Loans to Total Loans 0.43 % 0.45 % 0.55 % 0.51 % 0.49 %
Allowance to Non-performing Loans 181.80 % 175.81 % 145.06 % 151.84 % 159.00 %
Non-performing Assets to Total Assets 0.33 % 0.33 % 0.40 % 0.38 % 0.37 %
                     
(a) March 31, 2019 ratio is estimated
(b) This is a non-GAAP financial measure. A reconciliation to GAAP is shown below
Reconciliation of Total Assets to Tangible Assets
  March 31,   Dec. 31,   Sept. 30,   June 30,   March 31,
2019   2018   2018   2018   2018
Total Assets $ 2,356,074 $ 2,328,730 $ 2,292,678 $ 2,237,939 $ 2,167,517
Less Goodwill and other intangibles   43,625     43,952       44,305       44,661     45,015
Tangible Assets $ 2,312,449   $ 2,284,778     $ 2,248,373     $ 2,193,278   $ 2,122,502
Average Assets 2,338,792 2,301,847 2,255,049 2,199,960 2,162,706
Less average Goodwill and other intangibles   43,840   44,185     44,541     44,893   45,248
Average Tangible Assets $ 2,294,952   $ 2,257,662     $ 2,210,508     $ 2,155,067   $ 2,117,458
 
 
Reconciliation of Common Stockholders' Equity to Tangible Common Equity
March 31, Dec. 31, Sept. 30, June 30, March 31,
2019   2018   2018   2018   2018
Stockholders' Equity $ 272,951 $ 262,320 $ 248,789 $ 247,510 $ 241,240
Less Goodwill and other intangibles   43,625     43,952       44,305       44,661     45,015
Tangible Common Equity $ 229,326   $ 218,368     $ 204,484     $ 202,849   $ 196,225
Average Stockholders' Equity 267,736 252,449 250,503 243,792 240,387
Less Average Goodwill and other intangibles   43,840     44,185       44,541       44,893     45,248
Average Tangible Common Equity $ 223,896   $ 208,264     $ 205,962     $ 198,899   $ 195,139
 
 
Reconciliation of Net Income, Excluding Acquisition Related Costs
For the Three Months Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
2019   2018   2018   2018   2018
Net income $ 8,388 $ 8,686 $ 8,084 $ 8,073 $ 7,726
Acquisition related costs - tax equated 0 (180 ) 0 0 22
Net income - Adjusted $ 8,388   $ 8,506     $ 8,084     $ 8,073   $ 7,748
EPS excluding acquisition costs and deferred tax asset adjustments $ 0.30   $ 0.31     $ 0.29     $ 0.29   $ 0.28
 
 
End of Period Loan Balances
March 31, Dec. 31, Sept. 30, June 30, March 31,
2019   2018   2018   2018   2018
Commercial real estate $ 589,219 $ 579,481 $ 562,272 $ 523,417 $ 511,628
Commercial 254,957 245,172 233,188 232,672 231,498
Residential real estate 488,854 492,887 489,851 479,486 472,350
Consumer 209,541 216,284 220,826 219,138 210,088
Agricultural loans   198,210     199,013       182,038       181,173     170,725
Total, excluding net deferred loan costs $ 1,740,781   $ 1,732,837     $ 1,688,175     $ 1,635,886   $ 1,596,289

 

 
For the Three Months Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
Noninterest Income 2019   2018   2018   2018   2018
Service charges on deposit accounts $ 1,074 $ 1,115 $ 1,151 $ 985 $ 1,003
Bank owned life insurance income 214 221 219 219 222
Trust fees 1,858 1,752 1,827 1,740 1,807
Insurance agency commissions 803 642 567 713 699
Security gains 2 260 (34 ) 27 18
Retirement plan consulting fees 358 370 470 465 379
Investment commissions 260 259 273 315 256
Net gains on sale of loans 671 832 804 606 487
Debit card and EFT fees 778 861 814 870 806
Other operating income   502     393       387       366     333
Total Noninterest Income $ 6,520   $ 6,705     $ 6,478     $ 6,306   $ 6,010
 
For the Three Months Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
Noninterest Expense 2019   2018   2018   2018   2018
Salaries and employee benefits $ 9,356 $ 9,444 $ 8,966 $ 8,828 $ 8,738
Occupancy and equipment 1,717 1,566 1,597 1,611 1,704
State and local taxes 470 474 475 479 459
Professional fees 794 734 687 737 698
Merger related costs 0 (180 ) 0 0 25
Advertising 250 416 489 379 275
FDIC insurance 87 234 218 225 222
Intangible amortization 327 355 354 355 354
Core processing charges 791 762 778 794 739
Telephone and data 260 288 298 238 237
Other operating expenses   1,925     1,890       2,318       1,812     1,645
Total Noninterest Expense $ 15,977   $ 15,983     $ 16,180     $ 15,458   $ 15,096
 
 
Average Balance Sheets and Related Yields and Rates
(Dollar Amounts in Thousands)
           
Three Months Ended Three Months Ended
March 31, 2019   March 31, 2018
AVERAGE AVERAGE
BALANCE INTEREST (1) RATE (1) BALANCE INTEREST (1) RATE (1)
EARNING ASSETS
Loans (2) $ 1,727,950 $ 21,571 5.06 % $ 1,564,990 $ 18,509 4.80 %
Taxable securities 196,062 1,244 2.57 206,345 1,233 2.42
Tax-exempt securities (2) 207,618 2,011 3.93 185,560 1,680 3.67
Equity securities 11,932 175 5.95 10,887 146 5.44
Federal funds sold and other   34,789     196 2.28   35,070     145 1.68
Total earning assets 2,178,351 25,197 4.69 2,002,852 21,713 4.40
Nonearning assets   160,441   159,854
Total assets $ 2,338,792 $ 2,162,706
INTEREST-BEARING LIABILITIES
Time deposits $ 368,117 $ 1,659 1.83 % $ 271,473 $ 813 1.21 %
Brokered time deposits 46,861 266 2.27 0 0 0.00
Savings deposits 420,613 308 0.30 482,404 182 0.15
Demand deposits 589,595 1,202 0.83 451,295 416 0.37
Short term borrowings 197,787 1,231 2.52 282,408 881 1.27
Long term borrowings   5,907     48 3.30   6,863     44 2.60
Total interest-bearing liabilities $ 1,628,880 4,714 1.17 $ 1,494,443 2,336 0.63

NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY

Demand deposits 428,520 411,805
Other liabilities 13,656 16,071
Stockholders' equity   267,736   240,387
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,338,792     $ 2,162,706    
Net interest income and interest rate spread $ 20,486   3.52 % $ 19,377   3.77 %
Net interest margin 3.81 % 3.92 %
(1) Interest and yields are calculated on a tax-equivalent basis where applicable.
 
(2) For 2019, adjustments of $102 thousand and $416 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. For 2018, adjustments of $82 thousand and $349 thousand, respectively, were made to tax equate income on tax exempt loans and tax exempt securities. These adjustments were based on a marginal federal income tax rate of 21%, less disallowances.

Kevin J. Helmick, President and CEO
330.533.3341
Email: exec@farmersbankgroup.com

Source: Farmers National Banc Corp.

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